What is a seed phrase, and why is it important?
A seed phrase is your last resort when it comes to accessing the keys to your crypto. Should you ever get locked out of or lose your crypto wallet, your seed phrase can get you back in.
But, lose the seed phrase, and the crypto is gone, so keeping your seed phrase secure is a critical step in the process of self-custodying your crypto.
We’ll cover what a seed phrase is, best practices for managing your seed phrase, and what makes the Blockchain.com Secret Private Key Recovery Phrase unique.
If you’re not familiar with non-custodial wallets, read our article Crypto Wallets, Explained first to help you better understand this core element of crypto and DeFi.
What is a seed phrase?
Every time someone makes a crypto wallet, a series of numbers is created, which is called a seed. Using those numbers, the wallet program will generate a phrase of 12 or 24 random words, each associated with a specific number in the seed.
A seed, or recovery, phrase may look like this:
Part of what makes a seed phrase unique is the order of the words; they must be entered in the correct order for the phrase to work. When the seed phrase is entered into the wallet, access is granted, even if the user has lost their private key, had their phone stolen, or their hardware wallet has been destroyed.
Seed phrase vs. private key
While a private key and a seed phrase are both important parts of your wallet, there is a difference between them.
A private key is a series of numbers and letters associated with the wallet that allows a user to digitally sign transactions. The only function of the seed phrase is to associate crypto on the blockchain with a specific wallet.
It is essential to keep both the private key and the seed phrase private and secure. Anyone with access to your seed phrase can get into your wallet, and with your private key, they’d be able to withdraw any funds held there.
What if I lose my seed phrase?
If you lose your seed phrase, you lose access to that wallet and the crypto held with those keys.
This is a risk inherent in any self-custody arrangement. However, with a self-custody arrangement you are not reliant on a third-party custodian to properly manage your funds and grant you access to them when you need it.
The seed phrase is an essential security layer of security. It cannot be bypassed, so you can be assured that no one can access your wallet without it. While the possibility of losing your seed phrase is real, there are lots of ways to protect your seed phrase and keep it secure.
Secure your seed phrase
Whenever you create a wallet, you’ll receive a seed phrase for that specific wallet. You may have multiple wallets, resulting in multiple seed phrases.
It is a common practice for many crypto users to store their crypto across several wallets. This ensures that if a specific wallet is ever lost, they don’t lose all of their assets.
First, there are a few ways you should never store your seed phrase.
- In your memory. People forget things, and if you have multiple wallets, remembering your recovery phrases in the correct order for all of them may become too difficult.
- On any device. The notes section on your phone, a file on your computer or even on a USB — all are easily compromised and are not good places to store your seed phrase. If a device can be connected to the internet, the information on that device is susceptible to being stolen.
- On the cloud. This can be done, but it’s not ideal. Storing sensitive information on the cloud makes it vulnerable to attacks from all sorts of bad actors. Because data held on the cloud is connected to the internet, it is more likely to be targeted by cybercriminals.
Physical methods of storage work best, with the simplest solution being to write down your seed phrase when it’s created. Writing your seed phrase down is the bare minimum for storing it, but here are some other good ways to store your seed phrase:
- Lockbox or safe. Now that you’ve written your recovery phrase down, put it somewhere safe–like a safe. You can purchase a lockable file box or small safe at many retail stores or online, and many of these are waterproof and fire-resistant.
- Safe Deposit Box. A safe deposit box in a bank can be a great place to store your seed phrase, but it will cost you money on a recurring basis to maintain. This can be a good option for storage if you want to leave crypto in a will, since you can share the safe deposit box information instead of the seed phrase in the legal documents.
- Durable materials. There are several services that can be used to engrave or etch your seed phrase onto a material like stainless steel. The paper you write your seed phrase on can be destroyed by water, fire, or pests, so a durable material helps ensure it lasts through a tough situation.
Another way to manage your seed phrase is to duplicate, divide, and disperse it.
Some crypto users will make multiple copies of their seed phrase, keeping each copy in a different location. One copy might go in their personal safe at home, and another copy goes into a safe located elsewhere, like a climate-controlled storage facility.
Other people choose to break up their seed phrase; the first four words go into one safe deposit box, the second four words go into a different safe deposit box at a different bank, and the third set of four words goes into another vault at a third bank.
This might sound like a lot of work, but these methods can help you keep your crypto safe.
Your Secret Private Key Recovery Phrase
When you create a non-custodial Private Key Wallet at Blockchain.com, you’ll receive a seed phrase just like you would when you create a wallet anywhere else.
Within the Blockchain.com app, you’ll have multiple Private Key Wallets; as a simple example, if you hold BTC and ETH, you’ll have two Private Key Wallets, resulting in two seed phrases (one for each wallet).
Since managing these seed phrases is so important, we’ve provided an extra layer of protection: the Secret Private Key Recovery Phrase.
You can think of the Secret Private Key Recovery Phrase as your “master password” for all of the crypto in your Blockchain.com wallets. Because of the non-custodial structure of our Private Key Wallet, we never store or have access to your Secret Private Key Recovery Phrase.
Your 12-word Secret Private Key Recovery Phrase is a seed of all the private keys of all the addresses generated within the wallet, and will allow you to restore access to your funds even if you lose access to your original wallet.
This unique seed phrase is important for a few reasons:
- Backup to the backup. If you ever lose the private key to one or even all of your wallets, you’ll be able to restore the funds in that wallet with your Secret Private Key Recovery Phrase.
- Trading Account access. Your Trading Account is a custodial wallet, and uses a password to log in. If you ever forget or lose this password, you can get back into your Trading Account using the Secret Private Key Recovery Phrase.
- You own your crypto. This is the reason behind the Private Key Wallet in the first place–your keys, your crypto. Your Secret Private Key Recovery Phrase ensures that you alone–not a custodian–have access to your crypto, and that you’re able to access it.
When you’re ready to self-custody your crypto, you can visit Blockchain.com to create an account.
Important Note
This information is provided for informational purposes only and is not intended to substitute for obtaining accounting, tax or financial advice from a professional advisor.
The purchase of crypto entails risk. The value of crypto can fluctuate and capital involved in a crypto transaction is subject to market volatility and loss.
Digital currencies are not bank deposits, are not legal tender, and are not backed by the government. Blockchain.com’s products and services are not subject to any governmental or government-backed deposit protection schemes.
Legislative and regulatory changes or actions in any jurisdiction in which Blockchain.com’s customers are located may adversely affect the use, transfer, exchange, and value of digital currencies.
Seed Phrase, Explained was originally published in @blockchain on Medium, where people are continuing the conversation by highlighting and responding to this story.
